A spectator was shot in the arm after a dispute at San Francisco's annual gay pride festival escalated into gunfire on Saturday, police said.

Police responded to reports of gunshots in the United Nations Plaza area of downtown San Francisco as the first day of the city's two-day gay pride celebration was winding down.

"The incident is believed to have started when several groups of men, unrelated to the PRIDE event, got in a verbal argument near or inside the venue," the San Francisco Police Department said in a statement.